Company Reports

Eni reported adjusted net earnings of EUR 1.6 billion in the first quarter of 2024 compared with EUR 2.9 billion the year before, nearly meeting market expectations. The decline was primarily attributable to weaker gas and liquefied natural gas results due to lower prices and weaker trading results. Hydrocarbon production grew 5% from the year before on project ramp-ups and the Neptune Energy acquisition. Our fair value estimate and no-moat rating are unchanged.

Eni reported adjusted net earnings of EUR 1.6 billion in the fourth quarter of 2023 compared with adjusted net earnings of EUR 2.5 billion the year before, largely meeting market expectations. Full-year adjusted net earnings amounted to EUR 8.3 billion in 2023 compared with adjusted net earnings of EUR 13.3 billion the year before. Management will not release 2024 financial or operating targets until their capital markets day scheduled for March 14th, 2024. We do not expect any material change in outlook or strategy but will revisit our model at that time. Our EUR 14.90 fair value estimate and no-moat rating are unchanged.

Eni’s third-quarter adjusted net earnings fell to EUR 1.8 billion compared with adjusted net earnings of EUR 3.7 billion the year before as strong refining margins were not enough to offset the impact of lower oil and gas prices. Eni reported operating cash flow, excluding working capital, of EUR 3.4 billion compared with EUR 5.5 billion a year before. Net debt excluding leases rose to EUR 8.7 billion, implying a gearing ratio of 19% compared with 18% at year-end 2022. Capital spending was EUR 1.9 billion, with management reiterating guidance of EUR 9.0 billion for the year. Eni again left its shareholder payout guidance unchanged for 2023: a dividend of EUR 0.94 per share and EUR 2.2 billion in share buybacks. Our fair value estimate and moat rating are unchanged.

Eni’s latest strategy to achieve carbon neutrality in 2050 mirrors that of many peers as it seeks to invest in new low-carbon businesses. However, as with others its legacy hydrocarbon business will remain the primary earnings driver during the next decade and command the majority of investment.

Eni reported second-quarter adjusted net earnings of EUR 1.9 billion compared with adjusted net earnings of EUR 3.8 billion the year before as a strong global gas performance was not enough to offset the impact of lower oil and gas prices hurting E&P earnings and weak refining margins reducing refining earnings. Our fair value estimate and moat rating are unchanged.

Eni’s latest strategy to achieve carbon neutrality in 2050 mirrors that of many peers as it seeks to invest in new low-carbon businesses. However, as with others its legacy hydrocarbon business will remain the primary earnings driver during the next decade and command the majority of investment.

Eni reported adjusted net earnings of EUR 2.9 billion for the first quarter, a small decline from adjusted net earnings of EUR 3.2 billion a year ago. The weakening profit was a result of lower oil and gas prices, which fell 20% and 42%, respectively, from last year.

Eni reported adjusted net earnings of EUR 2.5 billion in the fourth quarter of 2022 compared with adjusted net earnings of EUR 1.7 billion the year before. Full-year adjusted net earnings amounted to EUR 13.3 billion in 2022 compared with an adjusted net loss of EUR 4.3 billion the year before.

Eni’s latest strategy to achieve carbon neutrality in 2050 mirrors that of many peers as it seeks to invest in new low-carbon businesses. However, as with others its legacy hydrocarbon business will remain the primary earnings driver during the next decade and command the majority of investment. It plans to grow production to 1.89 million barrels of oil equivalent per day, or mmboe/d in 2025 from 1.68 mmboe/d in 2021 while reducing its break-even level to below $25/bbl on average through 2025 and earning returns of 21% on new projects. Hydrocarbon production and investment post-2025 remain uncertain and market dependent, though management plans for natural gas to compose 90% of what will likely be a much smaller portfolio in 2050.

Eni reported third-quarter adjusted net earnings of EUR 3.7 billion compared with adjusted net earnings of EUR 1.4 billion the year prior. The improvement was a result of higher oil and gas prices, which aided the E&P segment. Our fair value estimate and moat rating are unchanged.

Eni’s latest strategy to achieve carbon neutrality in 2050 mirrors that of many peers as it seeks to invest in new low-carbon businesses. However, as with others its legacy hydrocarbon business will remain the primary earnings driver during the next decade and command the majority of investment. It plans to grow production to 1.89 million barrels of oil equivalent per day, or mmboe/d in 2025 from 1.68 mmboe/d in 2021 while reducing its break-even level to below $25/bbl on average through 2025 and earning returns of 21% on new projects. Hydrocarbon production and investment post-2025 remain uncertain and market dependent, though management plans for natural gas to compose 90% of what will likely be a much smaller portfolio in 2050.

Eni reported second-quarter adjusted net earnings of EUR 3.8 billion compared with adjusted net earnings of EUR 929 million the year before. The improvement was a result of higher oil and gas prices boosting E&P earnings and strong refining margins increasing refining and chemical segment earnings.

Eni’s latest strategy to achieve carbon neutrality in 2050 mirrors that of many peers as it seeks to invest in new low-carbon businesses. However, as with others its legacy hydrocarbon business will remain the primary earnings driver during the next decade and command the majority of investment. It plans to grow production to 1.89 million barrels of oil equivalent per day, or mmboe/d in 2025 from 1.68 mmboe/d in 2021 while reducing its break-even level to below $25/bbl on average through 2025 and earning returns of 21% on new projects. Hydrocarbon production and investment post-2025 remain uncertain and market dependent, though management plans for natural gas to compose 90% of what will likely be a much smaller portfolio in 2050.

Eni reported first-quarter adjusted net earnings of EUR 3.3 billion compared with EUR 270 million the year before. Higher oil and gas prices lifted exploration and production as well as global gas and liquefied natural gas earnings, which offset losses elsewhere.

Following BP’s announcement to exit its Rosneft stake (see our Feb. 28 note), Equinor announced it would stop new investments and start the process of exiting Russia as well. Equinor has minimal exposure to Russia, producing only 27 mboed in fourth-quarter 2021, about 1% of its total. Year-end non-current assets of $1.2 billion in Russia were a little less than 2% of its total. Equinor holds interest in one offshore and several onshore oil and gas fields, increasing its presence in 2020 by acquiring a minority interest in 12 onshore conventional exploration licenses from Rosneft. Given the relatively small position, our fair value estimate is unchanged.

Integrated oils have been dealing with sanctions on Russia for some time as many of those imposed from the 2014 annexation of Crimea remain in place. While they have had little impact, the Russian invasion of Ukraine is likely to spur a new round of sanctions that are perhaps more punitive. As we wrote in our Feb 23. note, however, we think sanctions that disrupt the flow of oil and natural gas out of Russia are unlikely given the West’s aversion to the higher prices that would likely follow. Meanwhile, Russia is unlikely to withhold volumes given its reliance on oil and gas revenue. Furthermore, effective sanctions that bite, might materially impact Western firms, making them less likely to be implemented, as well. That said, the uncertainty adds a new level of risk for those firms operating in the country. Of the integrated oils, we find BP and TotalEnergies to be the most exposed.

Eni reported adjusted net earnings of EUR 2.1 billion in the fourth quarter of 2021 compared with adjusted net earnings of EUR 50 million the year before. Full-year adjusted net earnings amounted to EUR 4.7 billion in 2021 compared with an adjusted net loss of EUR 758 million the year before.

Eni plans to spin off its renewable generation, retail and electric vehicle charging business as a separate entity, called Plentitude, in 2022, while retaining a majority stake. By unburdening the low-carbon power businesses from the legacy hydrocarbon business, management hopes to accelerate its growth and decarbonization and achieve a lower cost of capital. Whether this is achievable remains uncertain, as there are no real precedents, so it will provide a test case for other integrated oils.

Eni’s latest strategy to achieve carbon neutrality in 2050 rests on three pillars: decarbonization, diversification, and what it calls flexibility and resiliency. The latter pertains to improving the economics of its legacy oil and gas business which will remain the primary value driver in the medium term and command the majority of investment. It plans to grow production to 2.0 mmboed in 2024 from 1.7 mmboed in 2020 while reducing its breakeven level to below $30/bbl by 2024 and earning returns of 18%. Hydrocarbon production and investment post-2024 remain uncertain and market dependent, though management plans for natural gas to compose 90% of what will likely be a much smaller portfolio in 2050.

Eni reported adjusted net earnings of EUR 1.4 billion in the third quarter of 2021 compared with an adjusted net loss of EUR 153 million the year before.